I didn’t do a 2011 prediction because The Financial Philosopher convinced me that maybe it is not the best idea in the world, but The Financial Samurai wrote a great article this year convincing me that maybe it is still worth a shot. So here are my predictions.

1. Home prices will finally stabilize and possibly rise.

Call me crazy or overly optimistic but there are a ton of indicators pointing to stronger demand and lessening supply. I’ve already noticed a lot of people saying their rents are increasing more than inflation adjusted which points to more people wanting to buy homes again. We still have a lot of foreclosures to clear off the market, but inventory is finally starting to shrink. I used to have 5 or 6 homes in my neighborhood up for sale at any given time, but now I don’t see a single for sale sign. And home sales rose by over 13% last year which is a pretty good sign things are getting back on track.

2. Unemployment will slowly but surely shrink.

The worst is over. While the real unemployment numbers are anything but accurate, the overall number will shrink. Maybe it is people running out of unemployment. Or maybe it is increasing part time workers. It will be a combination of factors, but unemployment will drop as low as 7% and stay there for a long time. (It will stay there until the majority of the baby boomers feel financially able to retire, thus allowing younger generations to fill their ranks.) We might not see 5.6% unemployment (

3. The Stock Market will bounce like crazy.

With an election year and social unrest around the world, the stock market is going to bounce around like crazy. I can see large swings coming. Either the market will threaten to drop below 10k (if news is really bad), or rally up as high as 14k (if news is really good). Most likely it will hit 13,000 this year, then drop as low as 11,000 from profit taking in the 3rd quarter, then rise back up to 13k for a strong finish.

4. Another close election like the Bush-Gore election.

Only this time I think it will be the Republicans who will cry foul as Obama pulls out a narrow victory. It is really hard to beat an incumbent otherwise I would say a Republican candidate would win hands down. There is a lot of social unrest, and most people seem to be under the impression that Obama is a weak leader who can’t seem to get anything done. If the economy improves it will be an Obama victory. If the economy worsens I think there will be a Republican president sitting at the White House next year. It will probably be Mitt Romney, and we will almost certainly have a Republican controlled Congress.

5. I am not sure.

Anything could happen this year. I am waiting for a big scientific breakthrough that will stun the world. And possibly war with Korea or Iran. If anything can happen, it will happen. And we shall see, as always.

Either way I am starting off pretty optimistic about the year. I hope everyone else feels the same way.